Posted by: Josh Lehner | September 19, 2019

Two New Oregon-Related Research Papers

In recent weeks, I have been forwarded two new Oregon-related research papers that I have found particularly interesting. What follows is a overview of these papers. As always, if you have something you think our office should know about, please let us know! Email me here.

Low-Wage Workers and the Enforceability of Non-Compete Agreements. Michael Lipsitz and Evan Starr.

When it comes to underlying issues regarding economic mobility, wage growth and the like, two issues that economists have been researching more and more in recent years have been the impacts of occupational licensing and non-compete agreements. These issues overlap to some degree and have impacts across the economic spectrum. That said, particular focus, or at least lip service, is paid toward low-wage workers where the costs of these policies may be the greatest.

Occupational licenses create barriers to entry for new firms and workers trying to earn a living. Even if once they obtain the license, they earn slightly higher wages, their ability to switch jobs, careers, or move to a different state is restricted in the sense they may have to re-do all of that work again.

Similarly, non-compete agreements tend to restrict employment opportunities and hold down wage growth. This is because one of the best ways for workers to see wage increases is to switch firms, where a competitor outbids the current employer for the skills and experience of the employee. Now, non-compete agreements can have a time and a place for their use when it comes to firm secrets, or poaching clients and the like. However, research finds they generally hamper economic growth. There are a few particularly infamous examples from around the country, including a fast food restaurant having their employees sign non-compete agreements, thus preventing their workers from finding employment at another fast food establishment.

This new paper by Lipsitz and Starr focuses on a policy change here in Oregon that, effectively, made non-compete agreements unenforceable for hourly workers and for those earning below average incomes. This was actually something I, personally, was unaware until the authors reached out in the past year to discuss Oregon’s economy and the like. This particular legislation passed in 2007 (SB 248) and went into effect at the beginning of 2008.

Unfortunately there are no perfect natural experiments nor perfect data. A change like this occurring right as the economy went into the tank complicates matters as does the underlying data (CPS, aka the household survey, which is relatively small and noisy). All of that said, Lipsitz and Starr do everything they can empirically to control for known factors and isolate changes due to the policy.

The upshot of their research is that making non-competes unenforceable for low-wage workers increased hourly wages 2-3% — roughly equal to a year’s worth of wage gains. The policy also increased worker mobility, meaning that the probability of a worker moving from one firm to another increased as well. They find these results hold under a number of different specifications and also find expected results when breaking down the labor market into different occupations, based on educational attainment, race or ethnicity, or by gender.

The bottom line is that the research finds outcomes here in Oregon consistent with what one would expect given economic theory and the concerns surrounding non-compete agreements and low-wage workers.

Socioeconomic Well-Being and Forest Management in Northwest Forest Plan-Area Communities. U.S. Forest Service.

Last year the U.S. Forest Service issued a massive, 1,000+ page report on the Northwest Forest Plan. Eric White, one of the researchers, pointed me to Chapter 8 which discusses the research regarding socioeconomic well-being in communities within the forest plan area. It is a thorough look at underlying economic trends and issues and generally confirms many of the things our office has written over the years. A few items stood out to me in the chapter.

First, the sheer amount of research that has been conducted on communities and the local economies in the plan area was something I had not realized. Most of this research focused on the first decade following the plan implementation, where the largest impacts were felt. The report tries its best to synthesize and summarize these findings, with an incredible bibliography for future readings.

Second, two of these papers found that following the decline in federal harvests, the timber industry jobs losses were about 50/50 in terms of losses due to the harvest declines themselves and those due to increased automation and efficiency in the mills. One paper had it at 40/60 while the other had it 60/40.

Third, I enjoyed the discussion surrounding the different types of communities and the different paths they have taken in recent decades. By enjoy, I mean I think the report does a good job of discussing this and not trying to sugarcoat it. The report talks about communities that have grown in recent decades, largely due to their natural amenities attracting new residents and tourists. The report also notes that these newly created jobs are not perfect substitutes for the ones lost. The report also discusses communities pursing new production strategies and those that have experienced declines.

Fourth, and finally, the report is the most thorough I have seen regarding other uses of forests besides timber production. I suppose this should not be a surprise given the U.S. Forest Service is writing about the impacts of the forest. However I have not seen it spelled out like this and it is well worth your time if you are interested in learning more. Now, these other uses include things like biomass and recreation, but the part on nontimber forest products was new to me (starts of PDF pg 44). This includes bark, berries, bulbs, Christmas trees, fence materials, firewood, fungi, posts and poles, roots, seeds, and many other items. Additionally, the report touches on other types of forest-related employment as well, including forest service contracting, and ecosystem and wildfire management.

Overall, the report is not easily summarized in a few sentences. Nevertheless it remains a good resource for those interested in learning more about these topics and the underlying research.

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Posted by: Josh Lehner | September 13, 2019

Digging Into Oregon’s Strong Income Growth

Oregon always outperforms the typical state during economic expansions. Yes, part of this is playing catch-up after experiencing deeper recessions, but much of it has to do with our industrial structure and strong migration flows. However, this current expansion has been a bit different in that Oregon’s relative growth compared to the U.S. is considerably stronger than in recent expansions. This is due to both strong, local gains and relatively modest national gains making the comparison a bit easier. However, Oregon’s relative position vis a vis the typical state hasn’t been stronger in quite some time. Oregon’s average wage is at its highest relative point since the 1970s and the state’s per capita personal income is at its highest relative point in two decades, or since before the dotcom crash. The rest of this post digs into personal income gains in recent years.

Oregon’s income growth is stronger than the nation’s and even as we likewise see faster population gains, the state is still making up ground on a per capita basis.

Before going further, it can be helpful to look at the composition of personal income as reported by the Bureau of Economic Analysis. This helps give a sense of which components drive overall trends.

In recent years, Oregon’s growth across all major components of personal income are outpacing the nation. Wages are the key driver here as they account for just over half of personal income. As detailed recently, these wage gains are across all industries and regions in the state. Oregon is seeing similar growth advantages in dividends, interest, and rent, and other labor income (benefits) as well. However the biggest growth differential is among proprietor’s income.

Even as proprietor’s income only accounts for about 1 out of every 10 dollars of income, it can have an outsized influence on big picture trends when we see such differences compound over time. On the downside, the gap that emerged in proprietor’s income between the U.S. and Oregon was a big factor in the state’s erosion in overall per capita personal income in the past 40 years. Oregon is now beginning to close that gap.

In looking into the data, it really is an income growth story and not a base issue. The number of businesses and employment at proprietors is growing, however Oregon’s growth is somewhat slower here than the U.S. as a whole. As such, Oregon is losing just a bit of ground by those metrics. The significantly faster income growth among Oregon businesses more than offsets the slower increases in number of firms.

Switching over to tax return data can help shed some light on what types of businesses and which industries are driving Oregon’s gains in recent years. Keep in mind these are not all types of businesses and consist of sole proprietors and partnerships, which are more akin to the proprietors income in the BEA data. The published IRS data is limited to only a handful of years, but thankfully these are important years to examine in terms of Oregon making up some lost ground.

The chart shows average business income growth in Oregon on the vertical axis and then a measure of how much these gains are outpacing national trends on the horizontal axis.

Information, a small sector, is seeing the largest improvements and interestingly, this is coming from the motion picture and sound, and broadcasting (except internet) components and not from the high-tech portions of the sector. Manufacturing’s growth in recent years is driven largely by transportation equipment, while finance and insurance’s gains are across all subsectors there. All of that said, two of the biggest drivers of growth are construction and real estate. As the housing market rebounded, these activities, which tend to include builders, remodelers, flippers, and the like, picked up as well.

Nearly all other industries are also outpacing their national counterparts. This includes professional and business services which is the largest overall sector here.

Bottom Line: Oregon’s income growth across the board is outpacing the typical state. Faster job gains and higher prime-age employment rates are helping drive local wages to their highest relative point since the 1970s. While it can be hard to pinpoint the exact reasons why local businesses are seeing significantly faster income growth than their national counterparts, we know the stronger economy is at least a part. It is also possible, even likely that Oregon’s lower tax rate for pass-through income is playing a role too, as businesses have an incentive to report more of this type of income. Although the new federal changes may complicate the picture moving forward. All told, Oregon’s relative income growth compared to the U.S. hasn’t been this large since the early- to mid-1990s.

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Posted by: Josh Lehner | September 6, 2019

County Wage Growth (Map of the Week)

While the macro outlook is more uncertain today, one item our office has tried to highlight is that current economic conditions are pretty good. The share of prime working-age Americans and Oregonians is relatively high and wages are rising. Importantly, consumers will continue to spend until given a reason to be scared, which usually means job losses or the specter of job losses. As the labor market marches on, so too does spending and the overall economy even as storm clouds gather on the horizon.

Here in Oregon, these labor market improvements have outpaced the nation during the current expansion. Most encouraging are local wage gains. Today, Oregon’s average wage is at 94% of the U.S. average. This is the highest relative position Oregon has seen since the height of the timber industry in the late 1970s, when Oregon was 96% of the U.S. average. During our most recent forecast release, the discussion on this centered around how widespread these gains have been and whether they are keeping up with the cost of living.

To help flesh out these points, I pulled nationwide county wage data from 2014 to 2018 (the most recent full year). I chose 2014 in part because I wanted to look at wages since rural Oregon began adding jobs, which was around 2013 for most counties. The map below looks at annual wage gains across the country, broken down into quintiles. A few things stand out. First, one thing the map clearly shows is the oil crash that started in late 2014. Mining regions and the oil patch of the U.S. saw wage losses or minimal gains (lightest shading). Second, wage growth along the Left Coast has been particularly strong, outpacing the nation throughout the region. Third, similar gains are seen in the heartland and patches of the south.

Importantly, as shown in the map above and the graph below, stronger wage gains are seen across the entire state of Oregon. Most counties are above the U.S. average and those that are not, are not far behind. There are no stragglers in Oregon in recent years. These gains outpace inflation as well, meaning real, or inflation-adjusted wages are rising statewide. More on this in a minute.

Now, why are wages rising? It could be that Oregon, or a specific area is adding a lot of high-wage jobs which drives the average higher, while current workers see few gains. Or the state could be adding lots of jobs in high-wage counties, while the rest of the state sees minimal improvements. These types of compositional shifts could mask underlying weakness or overstate growth.

Fortunately this is not the case. At the statewide level, neither the shift in industrial structure nor the regional composition of jobs impact Oregon wage growth in recent years. At the county level, industrial shifts matter more but are not the biggest source of wage gains. Take Hood River for example. The county is leading the way in recent years, but every industry is seeing gains. In decomposing the Hood River wage growth, I find that 92% of the gains are due to higher wages in all sectors, while 8% of the gains are due to the county adding a lot of jobs in high-wage industries. In Wasco, I find the split to be more like 95/5. Morrow’s wage growth is entirely due to broad-based gains as the industrial shifts actually weigh on growth (possibly due to the winding down of construction projects).

Overall, this is highly encouraging. Workers in every industry and in every county are seeing wage gains. These gains are all outpacing the Federal Reserve’s preferred measure of inflation (personal consumer expenditure, or PCE) and are meeting or exceeding the more commonly used measure of inflation (consumer price index, or CPI).

Sadly, Oregon lost its own inflation measure as BLS dropped the Portland-Salem CPI in 2018. This past legislative session, HB 2118 standardized inflation calculations throughout state laws to switch from the old Portland-Salem CPI to the West Region All Items CPI. Our office’s forecast now includes the West CPI in our models and tables.

To help put local wage growth in perspective relative to inflation, the last chart shows annual percent changes in the different components of inflation. Wages have increased faster than inflation, but the pattern varies across categories. Obviously the big one is housing, which has outpaced wage gains. However every other component of the CPI basket has increased at a substantially slower pace. In particular, tame food and energy costs hold down overall price increases.

Stay tuned for more on household finances in the coming weeks.

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Posted by: Josh Lehner | August 28, 2019

Economic and Revenue Forecast, September 2019

This morning the Oregon Office of Economic Analysis released the latest quarterly economic and revenue forecast. For the full document, slides and forecast data please see our main website. Below is the forecast’s Executive Summary.

The current expansion is now the longest on record, celebrating its tenth birthday over the summer. The economic data flow remains solid overall and classic recession catalysts like an overheating economy are not rearing their heads. The good news is that expansion do not die of old age and the outlook calls for ongoing growth. However, expansion do tend to die due to bad behavior and policy mistakes. As such, the risk of recession is clearly rising in recent months. Revisions to both GDP and employment reveal a weaker and slower-growing economy than previously believed. The trade war escalation is spilling over and weighing on the economy to a larger degree as well. Businesses are wary as they delay investments and slow their pace of hiring. All of this has financial markets on edge and the Federal Reserve taking out insurance rate cuts in hopes of heading off a recession. Time will tell whether this is the top of the cycle or just a rough patch.

Oregon continues to see healthy rates of economic growth, however the state is no longer outpacing the rest of the country to the same degree as earlier in the expansion. The state is not immune to national and international developments. While topline manufacturing indicators in the state look good, cracks may be forming due to the trade war. All told, Oregon continues to hit the sweet spot for now. Growth is strong enough to keep up with an increasing population and deliver economic and income gains to Oregonians. The share of working-age residents with a job is higher than the average state and both wages and overall household incomes continue to rise at a faster rate.

During odd-numbered years, Oregon’s September revenue forecast provides a look back at the biennium that just came to a close.  Unlike the nationwide economic expansion, Oregon’s revenue picture has yet to show any cracks.  Through the end of the 2017-19 biennium, all major types of Oregon’s General Fund tax collections continued to outstrip gains in the underlying economy.

The strong growth at the end of the biennium resulted in an increased estimate of the kicker refund.  The personal income tax kicker is now expected to be $1.57 billion, making it the third largest as a share of liability on record.  Kickers of this size occur about once every decade, typically around the peak of the business cycle.  As was the case with the large kicker generated during the mid-1980’s, changes in federal tax policy played a large role in generating above-trend state collections last biennium.

All told, the September forecast reflects a stable economic outlook, with the expected size of General Fund collections increasing slightly over what was expected at the Close of Session. Total available resources have increased around $300 million, largely due to a bigger beginning balance carryforward.

However, when tax policy changes from the 2019 legislative session are factored in, the General Fund is expected to be significantly smaller over the forecast horizon than what was expected in May.  Most notably, the enactment of a Corporate Activity Tax (HB3427) brought with it personal tax rate cuts, and is expected to reduce business tax liability.  While the Corporate Activity Tax will clearly be a net positive for the state budget as a whole, it will reduce General Fund resources since the new collections will not be deposited there.

Heading into the new biennium, uncertainty about the performance of the nationwide economy has become paramount.  Growth will certainly slow to a sustainable rate in the coming years, but the path taken to get there is unknown.  Fortunately, Oregon is better positioned than ever before to weather a revenue downturn.  Automatic deposits into the Rainy Day Fund and Education Stability Fund have added up over the decade-long economic expansion. When the expected ending balance for the current biennium is included, Oregon has more than $2.5 billion in reserves set aside, amounting to more than 12% of the two-year budget.

See our full website for all the forecast details. Our presentation slides for the forecast release to the Legislature are below.

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Posted in Demographics, Employment, Income, Miscellaneous, News, Revenue

Posted by: Josh Lehner | August 16, 2019

Potpourri Friday: Age Distribution, Portland, and Timber

Three quick charts this week on items I’ve been working on and being asked about during presentations.

First, an updated look at the age distribution in Oregon. Obviously there is variation within these groups, but the combination of the age distribution itself plus migration patterns underpins our previous look at future economic growth across the state. A few things stand out.

Rural Oregon has a higher share of middle-age and older residents. This is no breaking news, but as our office has tried to highlight repeatedly, the demographic drag of retirements on the local labor force is largely about folks aging from their 50s (peak working/income years) to their 70s (vast majority of people are retired). Most rural areas in Oregon are largely through the biggest part of this transition. In the coming decade, the demographic impact is less than it has been in the past decade. Additionally, rural Oregon has proportionately the same number of children as urban Oregon.

Oregon’s secondary metros have a pretty even age distribution. This is partly a composition issue where the differences in each area offset one another. For example, Salem is home to a larger share of children, while Corvallis and Eugene’s 18-24 year old populations are large given the universities. But overall, there are no clear imbalances.

The Portland region attracts 20-something as young adults leaving the nest move to the big city in search of jobs. But Portland’s largest age differences are actually seen among the 60+ age chorts, which are relatively small.

Second, speaking of Portland — and this comes up quite frequently in presentations — the region is effectively half of the state totals. At times discussions can get bogged down into Portland versus the rest of the state and I hesitate to even post this chart, but it’s important to keep our facts straight here. The Portland region — the 5 Oregon counties that are part of the official Portland MSA — accounts for nearly half of Oregon’s population (48%), more than half of the jobs (54%), and a majority of personal income taxes paid by Oregonians (60%). Of course, overall we are one regional economy. Geographic boundaries have no real economic importance. Business to business sales, supply chains, and worker flows are strong across the state and spill across boundaries every single day.

Third, our office keeps receiving inquiries on the timber industry and I think I’ve come up with a new chart that helps drive home at least one of the points we try to highlight. This chart shows timber-related jobs as a share of the local economy and how timber wages compare to the county average wage. At the statewide level, timber jobs pay the same as the average job. However once you get into the heart of the Timber Belt, industry wages remain significantly above average and the sector accounts for a larger share of the local economy. See our previous update for more on the industry, history, and the challenges of replacing these jobs when they’re lost.

 

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Posted by: Josh Lehner | August 9, 2019

Friday Beer Thoughts: Local Demand

Many of the business discussions surrounding beer tend to focus on the number of breweries opening or closing. We use that as a barometer for the health of the sector, including our previous look at industry dynamism. Counting breweries is pretty easy, however it also provides an incomplete picture. The volume of beer produced matters, and what that says about consumer demand for the product. Between the Brewers Association and the OLCC beer reports, we can get a decent look at barrels of beer produced nationwide and here in Oregon. What follows below is a quick look at breweries in Oregon where we are able to measure both the number of breweries and how much beer they are producing that is sold in the state.

As of the start of the year, 32 of Oregon’s 36 counties has an operating brewery. And 30 of these counties have more breweries per capita than the U.S. average. That said, the picture shifts a bit when we take into account how much beer these breweries are actually producing. Just 5 Oregon counties produce more local beer per capita than the U.S. average, however if we focus only on craft beer nationwide and ignore the macro, then 11 Oregon counties outpace the nation.

To me, this speaks to the skewed distribution of brewery production. Focusing just on the beer brewed and sold in the state by Oregon breweries, the 8 largest ones account for half of the total, while the Top 20 account for 75%. I suspect similar patterns are seen elsewhere in the country, where a handful of large breweries account for the majority of sales.

Now, there are a couple ways to look at this. On one hand, the typical brewery in Oregon brews around 500 barrels per year while the average is 3,300. Most breweries in Oregon are small or at least smaller-scale operations. However, on the other hand, a lot of seemingly successful brewpubs are generally in that 400-700 barrels of beer range, using my eyeball econometrics. And I think this is where Oregon has stood out over time. Yes, the state is home to a handful of large, successful breweries with wide-ranging distribution networks. However, the state’s above average number of breweries per capita is all about the hundreds of smaller breweries and brewpubs.

With that said, let’s look at two charts showing county level data in Oregon. First up we can see that the usual suspects stand out in terms of local breweries relative to local population. Hood River (think pFriem, Full Sail, Double Mountain, et al) has 13 times the US average for breweries per capita and nearly 25 times the volume of craft beer produced. Both Deschutes (think Deschutes, 10 Barrel, Boneyard, Crux, Sunriver, et al) and Clatsop (Fort George, Buoy,) are in the 10-15 times the U.S. craft beer average of production, with Tillamook (Pelican) and Wallowa (Terminal Gravity) not far behind. Of course — and this is a topic I’ll return to later in this occasional series — not all of this beer is sold within these counties. These larger breweries sell across the state and also serve as tourism hubs for out-of-town folks visiting, tasting, and going out to eat.

The second chart zooms in on the bulk of the counties to get a clearer picture. Here you can really see that while nearly all Oregon counties have more breweries than the national average, they’re really not producing a ton of beer relative to the local population.

When I’m asked about whether Oregon has too many breweries, my answer is generally no in the context of looking at these local production numbers relative to the local population. Given that most counties are below the U.S. average, I suspect we could see more successful brewpubs, or production breweries with food carts or the like open up in many places. Right now, the number of breweries are equivalent to 5% of all food service establishments across the state. The true number is somewhat lower, but I do not have a good grasp of which breweries do and do not have food options. But the point being, in most communities across the state, this is not a saturated market.

That said, the concern, and one we’re seeing play out locally and nationwide, is that the growth of local, smaller breweries are taking some of the sales that previously went to the larger breweries with bigger distribution. As such, at least to some degree, if Oregon were to see increased brewery production in counties in the second chart, it may come at the expense of the outlier counties in the first chart.

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Posted by: Josh Lehner | August 2, 2019

Fun Friday: Marginal Propensity to Consume

One question our office gets quite frequently about the kicker is what sort of economic impact does it have. After all we are returning hundreds of millions, if not a billion, dollars to taxpayers who likely did not budget the kicker into their household finances. They’re certainly going to spend some of it, increasing consumer spending and stimulating the economy to some degree.

Previously our office used a 2015 study from Carroll, Slacalek, Tokuoka, and White that looked at what economists call the marginal propensity to consume (MPC). If you received $100 today, how much of that would you spend relatively quickly? The answer depends upon a household’s situation in terms of income, savings, wealth and the like.

Well, now is a good time to revisit those MPC estimates given not only is there another kicker in the pipeline but also the first round of Scharfstein v BP West Coast Product settlement checks just hit the mailboxes of 1.7 million Oregonians. See The Oregonian for more on the case, but the checks are for $91.94 each, with a second round coming next summer.

I was first alerted to the settlement checks by Pete Danko of the Portland Business Journal a couple months ago when he was wondering about their economic impact. As it turns out, Carroll et al. do have a somewhat newer and certainly more in-depth paper exploring how MPC changes given the point in the business cycle, and variations on household wealth.

In the table below I mock up some rough estimates of how much of the settlement checks are expected to be spent this year based on two of the model specifications in the new paper. The first is based on household income and the economy being in expansion. The second is based on household income and liquid financial assets which is a better measure of households ability to pay today given illiquid assets, like home equity, are harder to tap if needed.

Note that lower-income households have higher MPC as they are living paycheck-to-paycheck. However research in recent years has found that quite a few higher-income households are also living paycheck-to-paycheck and thus will spend more of their unexpected windfall than previously thought. Carroll et al build this into their liquid asset results, although all of their model specifications find that the economy-wide MPC is higher than their earlier work showed.

That said, much of the settlement checks will still be saved. The macro impacts are relatively small given the size of the overall economy and household decisions. The near-term bump in total consumer spending in Oregon this year due to the settlement checks is in the 0.02-0.04% range. However, if we think Oregonians will spend their unexpected windfall mostly on discretionary items like going out to eat or a new pair of shoes, then we will likely see a noticeable increase (0.1-0.3%) within these categories. Having a little bit of extra money in your pocket is always nice, especially as we head into the weekend. I hope you enjoy yours!

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Posted by: Josh Lehner | July 25, 2019

What Replaces Timber?

Between the mill closure in Coos Bay, downsizing in Forest Grove, and the lively cap and trade discussions, there has been a renewed interest and focus on the timber industry in Oregon. Our office has fielded nearly a dozen requests recently to speak about the industry, historical changes and the outlook. As such, I have fully updated and expanded our office’s Historical Look at Oregon’s Wood Products Industry which we originally published in 2012 and last updated a couple years ago. See those posts for a more complete summary of the industry’s history. An updated full set of slides are at the bottom of this post, but first I wanted to re-up some work that we have touched on a few times over the years.

There’s no question that the loss of good-paying jobs has a big, negative impact on a regional economy. The question is what comes next? The answer depends.

First at the statewide level, Oregon has seen the Changing of the Guard where the high-tech industry has essentially offset the decline of the timber industry. This is good news for Oregon as a whole and many other places around the country that experienced large manufacturing losses did not have something like this to help balance out their economies.

But we know that even if these trends offset at the statewide level they certainly did not at the regional level or for individual workers. In the 1970s, timber was important statewide but particularly so outside of the Portland region. Even so, Portland had a timber concentration two and a half times the national average, but Lane County’s was closer to 20 times and Douglas was 40 times the national average. Timber accounted for 20-30% or more of all jobs in most eastern and southern counties. Fast forward to today where the geographic distribution of high-tech jobs is very different. Nearly 80% of tech jobs today in Oregon are in the tri-county Portland area.

If not tech, what? As discussed before, many consultant studies point toward health care and tourism as growth opportunities for rural communities and those who have lost manufacturing jobs. This does work for some locations but, unfortunately, the successes are not necessarily replicable everywhere due to differences in scenic amenities, logistics, etc and due to the clustering of more advanced medical care in larger population centers. If the neighboring city gets a Level I trauma center, chances are you will not due to the close proximity.

Even so, travel-related industries and health care are growing in most locations due to Americans going out to eat more and an aging population. But these jobs are not always a 1:1 replacement, particularly in terms of wages and skills. As detailed before, the changes we’ve seen among working-age Oregonians without a college degree over the past generation are not good. If we look at the employment situation and how that has changed, a few such Oregonians were able to enter into a high-wage jobs, but the vast majority either ended up in a low-wage job or out of the workforce entirely. Now, a tight labor market today is pulling workers back in, so the situation is improving and not deteriorating every year, but the big picture shifts remain.

Regarding travel and tourism I would draw a distinction as best one can between travel/tourism and outdoor recreation. The former is really about providing services and meeting the needs of people visiting an area. This includes renting bikes, putting roofs over their heads, and feeding them. The economy is naturally creating a lot of these jobs due to Americans traveling and going out to eat.

However outdoor recreation is, for lack of a better description, a more classic business sector that just happens to focus its products and services on customers for outdoor activities. When it comes to insulated bottles, vehicle mounted tents, and the like they are your classic traded sector manufacturing items which can be sold across the country and around the world. The distinguishing line can be fuzzy but I do tend to think about them a bit differently in terms of the nature of the work performed, the local economic impact, and the outlook.

Lastly, the good news for the Timber Belt is that even though it suffered an economic shock on par with what the Rust Belt experienced, people did not pack up and leave in search of better opportunities. Now, some did and Oregon lost population in the early 1980s, but overall this has not been the case. This influx of new residents is good news. People are voting with their feet, saying they want to live in our communities. This also helps support the local economy. For example, while the decline in manufacturing and farm (think forestry here) jobs as a share was comparable, total employment in the Timber Belt has increased more than twice as much as total employment in the Rust Belt over the past generation or two. This is in no small part due to the population gains.

Now these employment gains overall are not always a direct replacement for the lost jobs. And as detailed in our recent look at industrial diversification, part of the reason Oregon’s industrial structure is changing is not just the good growth in new industries, but also the losses in some of our historical strengths. This will have implications for future business cycles here in Oregon and when coupled with local demographics, implications for the different regions with the state as well.

In terms of the outlook, our baseline is for stability and just a little bit of growth as the housing market improves. This stability is expected until something changes, be it a recession, higher harvest levels or the like. I think it’s clear that if we cut more trees, we’d get more jobs. However even if we saw 1970s harvest levels again, we wouldn’t see 1970s employment due to automation and mechanization within the industry.

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Posted by: Josh Lehner | July 18, 2019

More on Migration to Oregon

Last week we updated the basics of migration to Oregon. The post generated quite a few comments and questions. As such I wanted to post an update with a little more information.

First, a common theme among the discussions is what exactly makes Oregon different than the typical state when it comes to population growth. I would say three things. One, Oregon has among the lowest birthrates nationwide. Two, Oregon has an above average sized Baby Boomer cohort, many of which moved here in the 1970s and 1990s. Three, Oregon’s ability to see net in-migration across all age groups and across nearly all states on a consistent basis is what really makes us stand out. There’s a reason only about 1 out of every 3 adults in Oregon today was actually born here.

Second, the sentence “[t]he California migrants disproportionately locate along the coast and in central and southern Oregon” generated a lot of questions as well. I should have explained that one better and I do have a correction to make to it.

What I meant by disproportionate is looking at migration patterns relative to the existing population in Oregon. So if 10% of the state lives in southern Oregon but they see 20% of net migration from California, then I would say Californians disproportionately locate in southern Oregon. Similarly, central Oregon is home to 5% of the state’s population but they see 12% of net migration from California. You can see this in the chart below, along with migration patterns (shares of statewide totals) to Washington and then from all other states.

Now, while a plurality of Californians move to the Portland region, they do not move there at a rate above what you would expect given that the Portland region is basically half of the state. But the Portland region clearly accounts for the vast majority of statewide losses to Washington and statewide gains from the rest of the country.

What you may notice is that the coast does not stand out. In recent years Californians (or migrants more broadly) are not disproportionately moving to the coast. I am correcting the sentence in the previous post. Now, during the housing boom and through the bust’s aftermath, this was definitely true, up until 2012. Since 2013, the share of Californians moving the coast is what you would expect, or lower, given the size of the local population. My apologies for the mistake.

Other items that stand out include that the Willamette Valley sees relatively little migration to or from other states given its size. Apparently not a lot of people around the country pack up and move directly to Albany or Salem. Now, if you look back at the county bubble chart in last week’s post, Oregonians are moving to Albany and Salem at higher rates than Americans more broadly are. The Valley remains an attractive place to live but does not garner the national attention that, say, Bend and Portland do.

Speaking of Bend, central Oregon has seen a net gain from Washington in recent years. This is unusual given that we typically see net losses from all parts of Oregon to Washington. But each of the past few years, central Oregon has gained population from all parts of Washington include the Seattle MSA and southwestern Washington. I will be keeping an eye on this when new data comes out.

Finally, I wanted to post a couple of charts that are updates from work we did six years ago. These look at where in Washington folks from Oregon are moving to and then where in California folks are moving from. These charts don’t show a full regional decomposition but I tried to highlight the important patterns and where some patterns differ.

First up, let’s look at the Oregon outflows to Washington. Overall, a bit more than half of Oregonians who move to Washington move just across the river to southwest Washington. Nearly 90% of Oregonians moving to southwest Washington come from the Oregon side of the Portland MSA. As mentioned last week, these patterns are partly about taxes but also partly about the classic suburban play.

Now, once we get away from Portland, we see different migration patterns. For example, migration to the Seattle region accounts for a larger share and then those moving out of eastern Oregon mostly move across the border into the Tri-Cities or Walla Walla areas. Among the the “Rest of WA” groups, the largest moves there include those to Olympia and Spokane.

Lastly, let’s take a similar look at where in California people moving to Oregon come from. I think the biggest misconception out there is that most California migrants come from the Bay Area. This is just not the case. Most come from Southern California.

Now, the Bay Area is only about 20% of the California population so these migration patterns show the Bay Area punching above its weight, but still a minority overall.

Regarding southern California, more than one-third of these migrants come from LA and nearly one-quarter from San Diego.

Also note that the Rest of California migrants account for a larger share of those moving into southern Oregon. Half of these migrants (16% of the total) come from the very northern California counties, which account for just 1% of California’s population. This speaks to the fact that not very many people move overall, and most of those that do move, do not move very far. This is one reason why the migration flows along the West Coast are so much larger for Oregon than when looking at the other states.

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Posted by: Josh Lehner | July 11, 2019

Migration to Oregon, an Update

In recent months we have discussed the big picture outlook for labor supply, the silver tsunami of retirements, how migration is slowing but remains the key driver of population gains, and how birthrates are dropping and deaths are rising. However, what we haven’t done in some time is update the nuts and bolts on migration. Lately, I have been getting requests for presentations on migration and what follows largely stems from updating some of our office’s standard charts. For more on migration and how it impacts Oregon, see Mark’s Destination Oregon presentation from a few years ago.

First, our standard population chart we include in every presentation we give shows both the number of new Oregonians each year and the growth rate. Even as migration flows returned in the recent years, Oregon is a larger place today so the growth rate remains lower than what we saw in the 1970s and 1990s.

In terms of who moves to Oregon, it is important to keep in mind that migration is for the young. This goes for both those moving into Oregon and those moving out of state. And while Oregon does see a net gain from all age groups, 20- and 30-somethings account for the lion’s share. Our office pays particular attention to those in their root-setting years as this is when most people begin their careers in earnest, settle down, get married, have kids, and buy a house. This matters economically because the 20- and 30-something represent an influx of young, skilled labor for local businesses to hire and grow their operations.

In terms of where migrants are moving from, it typically is everywhere in the country except for Washington. In good times and in bad, more Oregonians move to Washington than Washingtonians move to Oregon. Some of this is likely due to tax policies, but some of this is also the classic suburban play, both of which are greatly influenced by our largest population center being located on the border. Overall, 30-40% of in-migrants typically come from California and then Oregon gains a little bit from every other state. The California migrants disproportionately locate along the coast and* in central and southern Oregon. Migrants from other states tend move in patterns similar to overall population in the state, so mostly to Portland and then the other urban areas as well.

* Since 2013 Californians no longer disproportionately move to the coast. Apologies for the mistake. See this post for more.

Now, among the non-West Coast states, the specifics do vary from year to year and even across data sets. I tend to focus less on any given year and look across time to see larger patterns. The reason is we will occasionally see a big gain from North Carolina or a big loss to Louisiana, but those are not typical and are blips along the way. Additionally different data sets vary as well. Over the past decade the ACS shows mostly losses to Arizona and gains from Idaho, while IRS migration statistics show the exact opposite pattern. Update: In the comments Guy mentions that IRS is probably a better data set given it covers the majority of the population. The ACS is based on a sample and is inherently more noisy. The advantages of the ACS is getting the characteristics of migrants (demographics, employment, income, etc) which the IRS data lacks.

Looking across the state shows which counties are gaining or losing population to other Oregon counties and that nearly all are gaining population from other states. Again this is just a single snapshot in time. Earlier in the expansion, nearly all migrants within Oregon were moving to the Portland MSA as that’s where all the job growth was occurring. Today, as the economy is growing everywhere, migration patterns are a big more spread out and 2 of the big 3 Portland area counties saw net out-migration to other Oregon counties. This is also not typical, but shifts like this are something our office is keeping an eye on. Similarly, Oregon counties rarely experience net out-migration to other states, as such the losses in Harney, Morrow, and Umatilla are likely more noise and less signal but worth monitoring moving forward.

Finally, a friend of our office asked about returnees to Oregon. Or are we seeing more people move back to Oregon after leaving the state earlier in their lives? We lack good data on this but Census data does show which state someone was born in, where they lived last year and where they live this year. This is an incomplete picture of someone’s life, obviously, but it is the data we have available. What we see so far in the Census data is returnees to Oregon are pretty steady both in number and as a share of all in-migrants to the state. Over the past few years 1 out of every 6 migrants to Oregon were born in the state. This includes the fact that 1 out of every 8 Californians moving to Oregon were actually born in Oregon as well.

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